Sector movers: Miners drag London market lower as Glencore takes a tumble

Mining stocks dragged the London market lower on Monday, with Glencore and Anglo American feeling the effects of headwinds from a troubled commodities market.

The FTSE 100 reversed Friday’s gains and fell back below the 6,000-level closing down 2.46% or 150.15 points at 5,958.86, while the FTSE 250 was 1.11% or 185.71 points lower at 16,614.16.

Base metal futures fell further on the London Metal Exchange extending the past week’s declines well into the European session on Monday. Past the midway point of trading, LME’s three-month delivery contracts of primary aluminium (down 1.8%), copper (down 2.5%), lead (down 1.6%), tin (broadly flat) and zinc (down 1.9%) were trading lower.

More specifically, copper prices are likely to come under further pressure with demand growth in general and China’s particular seen to be pulling back, say analysts at SP Angel. Only nickel (up 0.3%) avoided the drop for a second successive session, with fundamentals expected to improve on a decline in the growth of Chinese nickel pig iron production and perceptions of underinvestment.

Glencore (down 29.42%) and Anglo American (down 10.09%) were the top blue chip fallers after Investec said the challenging environment for the sector calls into question the equity value of the mining companies. The note from the brokerage came as Glencore agreed to sell its Araguaia nickel project to Horizonte Minerals for a discount price of $8m.

Other miners, including BHP Billiton (down 6.03%) and Antofagasta (down 4.94%) also declined as commodity prices dropped and a report showed an 8.8% decrease in Chinese industrial profits in August, adding to concerns about an economic slowdown in world’ second largest economy.

FTSE 250 fallers narrated a similar tale of woe, with Kaz Minerals (down 26.35%) and Vedanta Resources (down 5.78%) in the bearish mix. Oil midcaps Tullow oil (down 7.02%) and Premier Oil (6.03%) registered substantial declines with the Brent crude oil front month futures contract shedding 1.56% or 76 cents to $47.84 per barrel in a volatile session on the oil markets.

On a positive note, beverage sector stocks rose following a Sunday Times report that Anheuser-Busch InBev SA could make a $106bn bid for SABMiller (up 1.30%) much sooner than originally anticipated. Talks between the two brewing giants are said to have been warming up and carried on over the weekend.

Aerospace and defence stocks rose as BAE Systems gained after Bernstein upgraded the stock ‘outperform’ from ‘market perform’, with an unchanged price target price of 545p. Additionally, Ultra Electronics rallied after JP Morgan Cazenove upgraded the stock to ‘overweight’ from ‘neutral’.